Monday, June 29, 2009

And where'd that money go (I used rolling 12-month as the monthly data is too choppy)?

Before you celebrate the fact that the savings will be consumption at some point in the future, think again. Per Market Ticker:

"Saving", by the way, includes debt paydowns; the government in its "infinite wisdom" computes the "savings rate" as "income less spending", which is not actually correct; money that goes from income to paying down debt isn't "saved". This increase shows that consumers continue to reduce borrowing activity (out of both choice and necessity) and are desperately trying to tread water in their sea of debt (never mind the occasional shark that comes by for a snack!)

Owe Jesse makes the case that reduced debt burden is just as good as savings and I will agree to that (and I'll admit I overlooked that). My thinking was related to the amount "saved" due to the making of interest payments that don't reduce an individuals debt burden. In that case, I don't see the net benefit going forward.